Types of Contract Law: A Comprehensive Overview - Craig Cherney, Expert Witness

Contract law governs the creation, enforcement, and interpretation of agreements between parties. Contracts can take various forms, and they are categorized based on factors like how they are formed, their purpose, the nature of the agreement, and the relationship between the parties. Below is a comprehensive overview of the types of contract law:

1. Types Based on Formation

a) Express Contracts

Definition: In an express contract, the terms of the agreement are explicitly stated, either in writing or verbally, by the parties involved. Both parties clearly understand and agree to the terms.
Example: A written employment contract that outlines salary, job responsibilities, and working conditions.

b) Implied Contracts

Definition: Implied contracts are formed by the actions, behavior, or circumstances of the parties, rather than by explicit words. There are two types:
- Implied-in-Fact Contracts: Created through the conduct of the parties rather than verbal or written agreement.
- Implied-in-Law Contracts (Quasi-Contracts): These are not true contracts but legal obligations imposed by a court to prevent unjust enrichment.
Example: Ordering food at a restaurant implies you agree to pay for the meal (implied-in-fact).

2. Types Based on Performance

a) Executed Contracts

Definition: In an executed contract, both parties have fully performed their obligations under the agreement.
Example: A contract for the sale of goods where the buyer has paid, and the seller has delivered the goods.

b) Executory Contracts

Definition: In an executory contract, one or both parties have not yet fulfilled their obligations.
Example: A lease agreement where the tenant has yet to pay future rent, or the landlord has yet to provide housing for the full term.

3. Types Based on Enforceability

a) Valid Contracts

Definition: A valid contract is one that meets all the necessary legal requirements and is enforceable by law. These requirements include offer, acceptance, consideration, mutual intent, and legal purpose.
Example: A contract for buying a car that both parties agree upon and fulfills all legal requirements.

b) Void Contracts

Definition: A void contract is one that is not legally enforceable because it lacks one or more essential elements of a valid contract.
Example: A contract for an illegal activity, like selling illegal drugs, is void from the start.

c) Voidable Contracts

Definition: A voidable contract is initially valid but can be legally canceled or voided by one party, often due to issues like misrepresentation, duress, or the lack of capacity to contract (e.g., a minor).
Example: A contract signed by a minor can be voided by the minor but remains valid if they choose to honor it.

d) Unenforceable Contracts

Definition: An unenforceable contract is one that, while valid when formed, cannot be enforced due to certain legal defenses, such as the statute of limitations or lack of written form when required by the Statute of Frauds.
Example: A verbal agreement to sell land may be unenforceable due to the requirement that real estate contracts must be in writing.

4. Types Based on Offer and Acceptance

a) Bilateral Contracts

Definition: A bilateral contract involves mutual promises made by both parties, where each party agrees to perform an act in exchange for the other’s promise.
Example: A contract in which a company agrees to deliver goods and a buyer agrees to pay for those goods.

b) Unilateral Contracts

Definition: In a unilateral contract, one party makes a promise in exchange for the performance of an act by the other party. The contract is only formed once the act is performed.
Example: A reward contract, where one party promises to pay if another party finds and returns a lost dog.

5. Types Based on Nature of Obligation

a) Contract of Adhesion

Definition: A contract of adhesion is a standard-form contract drafted by one party, usually a business, and offered to the other party on a “take-it-or-leave-it” basis, with little or no opportunity for negotiation.
Example: Insurance contracts or software license agreements.

b) Aleatory Contracts

Definition: An aleatory contract involves performance that is dependent on an uncertain event or contingency.
Example: Insurance contracts, where payment from the insurer is only triggered by specific events, such as accidents or natural disasters.

c) Option Contracts

Definition: An option contract gives one party the right, but not the obligation, to execute the contract at a later date under specific terms, usually in exchange for consideration.
Example: A real estate option where a buyer pays for the option to purchase a property at a later date.

6. Specialized Types of Contracts

a) Sales Contracts

Definition: A sales contract is an agreement for the transfer of goods or services from one party to another for compensation.
Example: A contract for the sale of a vehicle.

b) Service Contracts

Definition: A service contract is an agreement where one party agrees to perform a specific task or service for another party.
Example: A contract with a plumber to fix a leaking pipe.

c) Employment Contracts

Definition: An employment contract sets out the terms of the relationship between an employer and an employee, including duties, compensation, and working conditions.
Example: A full-time employment agreement outlining salary and benefits.

d) Franchise Contracts

Definition: A franchise contract allows one party (the franchisee) to use the business model and brand of another party (the franchisor) in exchange for fees and adherence to certain rules.
Example: A fast-food franchise like McDonald’s or Subway.

e) Government Contracts

Definition: Government contracts are agreements between a government entity and a private individual or company, typically for the provision of goods or services.
Example: A defense contractor agreeing to build military equipment for the government.

7. Types Based on Legal Purpose

a) Contracts for Illegal Purposes

Definition: Contracts for illegal purposes are agreements that involve activities that are against the law. These contracts are void and unenforceable from the start.
Example: A contract to smuggle contraband.

b) Contracts in Restraint of Trade

Definition: These are contracts that limit one party’s ability to engage in business or trade. They are typically disfavored by courts unless they are reasonable in scope and protect a legitimate business interest.
Example: A non-compete agreement in an employment contract.

Conclusion

Contract law encompasses a wide range of agreements, from express and implied contracts to bilateral and unilateral arrangements. Each type of contract serves different purposes and has its own legal considerations, making it crucial for parties to understand which type they are entering and its legal enforceability. Understanding these distinctions helps parties navigate the complexities of contract formation, performance, and enforcement.

Real Estate Expert Witness Services by Craig Cherney, Esc.

Craig Cherney is a trusted client advisor and a sought after real estate expert witness who is hired by the nation’s top real estate litigation attorneys to help resolve their litigated real property matters. Craig has appeared as a testifying expert witness before judges and juries in California, Arizona, Nevada and other jurisdictions across the country. Craig Cherney, Esq. Expert Witness Real Estate. 480-399-2342.